Eberhard Kern, Managing Director and CEO of Mercedes-Benz India, believes the pre-owned car business is an important entry point for a luxury brand.
Unsurprisingly, Kern is bullish on Mercedes-Benz Certified, the company’s pre-owned car brand launched last week. This initiative saw 12 dealerships across the country throw open their doors to the business with 150 cars, a number that is expected to nearly double next year.
The pre-owned car business, according to Kern, marks the “final activity” in the Year of Excellence which saw a lot of brand activity from Mercedes coupled with the launch of 10 products and 14 new dealers entering the fold.
Purchasing pre-owned cars is a common practice in the West which is now catching up gradually in India’s luxury segment. For every 100 new cars, there are 110 pre-owned sold every year. This ratio is still lower than some developed markets but, oddly enough, ahead of China, where customers have higher disposable incomes and are more inclined to buying new luxury brands.
“We have been working on this for almost a year now with a dedicated team and dealer partners. We wanted to start off with a bang and just not make it another used car offer,” Kern says. It was crystal clear to the company that pre-owned cars will be the fastest growing component of the luxury business with more and more customers queuing up for high quality offers.
Making this vision a reality involved “a lot of sweat and effort” with over 100 people completely immersed in this business. Online activity plays a big role as pre-owned car customers come from every part of India. If a car interests someone, they get in touch with the dealer and the buying process kicks off.
Growth lever
This is particularly important in the case of India since it is so diverse and, yet, with the same set of aspirations across cities and small towns. Mercedes is working doubly hard to establish itself as a national brand and here is where the pre-owned car business becomes a critical growth lever.
Kern cannot help but compare the demand topography in India with Russia where he had had a stint not so long ago. While Moscow and Saint Petersburg alone accounted for 80 per cent of Mercedes’ business, the NCR region in Delhi and Mumbai take up less than half.
“This means the majority of our sales come from beyond these two metros. This is true for new cars and will perhaps be even more pronounced in the pre-owned business,” he says. Globally, loyalty for the Mercedes brand begins first for pre-owned cars which outsell their new siblings in developed markets.
The lifecycle of a new luxury brand is 20 years which only puts in context the immense potential for pre-owned cars. In addition, the pre-owned business is no longer seen as being cheap or making any compromise on quality.
“People don’t consider it infra dig any longer and this is where our dealers will play a big role. We invested the same levels of training in this business because it is not as if a pre-owned car comes in cheap and customers, therefore, expect the same levels of quality and service,” Kern says.
Pre-owned push The Mercedes chief adds that he will not be surprised if growth next year is better than the 40-per cent surge seen in 2014.
This will be a result of the pre-owned initiative which is but the next “logical stage of development” in the luxury car business.
Mercedes dealerships will now need to focus on three business pillars: new cars, pre-owned and service.
“It is finally about customer satisfaction with profitability and sustainability being the drivers. The luxury car share in India is just 1.5 per cent but will grow in the coming years,” a confident Kern says.